China's Rocketing Economy Brings Call for Rule of Law

BEIJING
— IN China, where law has been subservient to the whim of politicians and the military, one prominent official is trying to build up the legal system and create a more powerful legislature -- that could also be used as his future political base.

In recent weeks, China has faced growing problems rooted in a legal and regulatory system that lags far behind its fast-growing economy.

Attempting to step into the serious legal vacuum are the legislative National People's Congress and Qiao Shi, its chairman and the most shadowy of China's senior Communist leaders.

Beijing is on the brink of a potentially disastrous trade war with Washington over the lack of enforcement of protective copyright laws. The United States has given China until early February to crack down on the piracy of trademarks, software, and compact and laser discs or face sanctions against billions of dollars of exports.

But China says its ability to rein in pirate factories is limited since many are owned and protected by local governments.

Some high-profile international contract disputes also are tarnishing China's reputation as a foreign investment hub. Chinese authorities wishing to clear the way for a lucrative downtown real estate development have evicted fast-food giant McDonald's from its choicest location, despite a 20-year lease.

In New York, investment banker Lehman Brothers has sued two Chinese government-owned firms, which allegedly defaulted on $100 million in losses incurred in trading foreign currencies and related financial products.

The firm is also part of a banking consortium trying to recover $40 million from a subsidiary of China International Trust and Investment Corporation for alleged debts caused by illegal trading in metals futures.

Congress takes charge

The Congress is still widely dismissed as a rubber stamp for the Communist Party, whose committees supervise all courts and have final legal say in China. But since taking charge two years ago, Mr. Qiao has raised the legislature's profile as architect of a skeletal legal system and as a vehicle for his own political ambitions, Chinese and Western analysts say.

''China is still not a country where laws necessarily produce a rule of law,'' says a Western lawyer with extensive experience in China. ''But by spelling out economic rights and obligations for businesses, the precedent is being set for defining the rights and obligations of citizens and their government at some point down the road.''

Amid political maneuvering for succession to the ailing paramount leader Deng Xiaoping, Qiao has moved to broaden the legislature's powers and create a semblance of legality a step above Mao Zedong's lawless rule by personal edict.

Raft of new laws

At a meeting last week, senior parliamentary leaders delved into such touchy topics as police and prison operations, banking and monetary policy, protection of overseas investors and bankrupting decrepit state enterprises. They approved new laws or draft bills for action next year by the full legislature.

''It is always better to have laws than not. It is better to draft laws quickly rather than slowly,'' Qiao said, quoting Mr. Deng, in a speech reported this week on the front page of People's Daily, the Communist Party newspaper. ''Some of the old laws are no longer suitable to development in a socialist-market economy. We must sort them out and clean them up carefully and revise or abandon them.''

A former chief of state security and a member of the all-powerful standing committee of the Communist Politburo, the reclusive Qiao is believed by analysts to be building the legislature's lawmaking clout under instructions from Deng and, in the process, creating a base useful to him in future factional struggles.

Qiao is seen as a key Deng ally with a reputation for some independence. During a May 1989 vote by the party standing committee on the imposition of martial law, Qiao was reported to have abstained. Still, he oversaw the brutal suppression following the June 1989 military massacre of pro-democracy demonstrators.

Although a succession team of President Jiang Zemin, Premier Li Peng, and Vice Premier Zhu Rongji are in place to take over when Deng dies, Qiao could become China's dominant political figure in the long-term.

''Qiao Shi is creating a strong base as chairman of the legislature,'' says a Chinese journalist with access to senior leaders. ''In the years ahead, he will be the most important leader to watch.''

The legislature's latest package of bills includes the country's first prison law setting out work requirements for prisoners as well as guaranteeing their rights to accusation, appeal, defense, and safety. Though an apparent effort to control rising crime and police corruption, the bill was greeted with skepticism by Western human rights activists and lawyers who said Chinese officials have never obeyed similar guarantees approved in the past.

Many political activists have tried to sue the government seeking redress and compensation for prison abuses but to little avail. In China, courts are still overseen by special party committees -- often headed by the local secret-police chief -- which set policies and review all court decisions before they are made public.

In the economic sphere, the legislature also is trying to extend its supervision over the central bank and monetary policy and the government's dilemma over allowing state-run enterprises to go bankrupt.

Governing economics

At a time of soaring inflation, the legislative leaders are asserting their right in a draft bill to review monetary policy, still under control of the People's Bank of China, and the modernization and growing autonomy of the central bank. Last week, the government State Statistical Bureau reported the economy in 1994 grew at a torrid 11.8 percent and consumer prices jumped 21.7 percent, more than double the official target.

To reduce the heavy losses among decrepit state enterprises, proposed legislation to tighten the eight-year-old bankruptcy law is also under review. With more than 40 percent of state-owned companies in the red, Chinese observers say the new draft bill could accelerate the process.

Still, arbitrariness widespread in Communist China will continue to retard the emergence of a solid legal system, with increasingly serious consequences, Western observers say. China ''is a broad country,'' Qiao said. ''It is impossible to include every situation into one law.''